NADA economist predicts new car sales will peak in ’16

Melissa Burden
The Detroit News

The chief economist for the National Automobile Dealers Association said Tuesday he expects U.S. new vehicle sales will peak next year.

He estimates sales will reach an estimated 17.7 million vehicles before leveling off “gently” to about 17.2 million vehicles in 2017, and falling to the 16.8 million to 17 million range the next few years after that.

Steven Szakaly, chief economist for NADA, said the 2.3 percent jump over his recently raised 2015 forecast of 17.3 million sales this year, would mark the seventh straight year of U.S. new car sales growth.

“The industry remains healthy and continues to grow,” he said in a call with reporters ahead of the Los Angeles Auto Show.

Szakaly said millennials starting families, new housing starts and strong employment growth have helped fuel new vehicle sales this year. NADA had projected 16.9 million sales for 2015 and has twice revised that forecast upward this year.

Through October this year, U.S. sales have hit 14.5 million, up 5.8 percent from the same time period a year ago. The industry is on pace and could set a record this year for new car sales, surpassing 2000’s 17.4 million sales. Last year, automakers sold about 16.5 million vehicles in the U.S.

Next year, Szakaly predicts sales will continue to grow as wages grow moderately, with falling gasoline prices and continued low interest rates on auto loans. He expects wages will grow 2 percent over the next year and interest rates will rise by up to 0.75 percent by the end of 2016.

But the pressures on wages and income, expected rising interest rates to lower credit tiers, plus issues such as a slowing Chinese economy and sharply rising dollar could begin to negatively impact auto sales next year, Szakaly said.

“We’re also seeing the beginning of the end of what has been a tremendous amount of pent-up demand for light vehicles,” he said.

With the truck segment’s percentage of overall sales expected to keep rising in 2016, automakers also likely will begin to hike incentives on cars, as they “chase market share” and “volume,” Szakaly said. He said the market in the long run is not “sustainable” above 17 million vehicles because of federal regulatory compliance requiring improved fuel economy and stagnant wages.

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